Mixed-use urban developments are redefining retail concepts. The Fitrow section at Federal Realty’s Assembly Row in Somerville contains five separately owned fitness studios. Image courtesy of The Dartmouth Co.
Traditionally a retail real estate specialist, The Dartmouth Co. has adapted the role we play dramatically over the past decade. As single-story retail integrates into larger, mixed-use projects, the challenges and opportunities increase. Retail uses and users have a significant impact on the culture and appeal of vertical mixed-use developments, ultimately driving residential and office rents.
The integration of uses within most new, large-scale developments has led to an interesting dynamic in commercial real estate in recent years. The lines between asset classes have blurred. In order to be successful and to understand the full potential of any significant property, one needs to appreciate zoning and building requirements, market needs and relative values across varying asset classes. This phenomenon led us to launch Converge Ventures (CNVRG), a real estate services business focused on mixed-use and multifamily leasing, sales, land planning and consulting. We are a first-in-market joint venture between a commercial brokerage (The Dartmouth Co.) and a residential brokerage (Columbus & Over Group).
Mixed Use Goes Higher
The mixed-use revolution that has dominated development in Greater Boston for close to 10 years has been led by impressive, urban, vertical mixed-use developments including The Hub on Causeway, Assembly Row, Ink Block, Seaport Square and many others. Each of these transformative, large scale projects have redefined the neighborhoods within which they exist and have pushed the envelope in terms of retail, residential and office space offerings. These four projects alone bring over 13.8 million square feet of new real estate to the metro Boston.
Through both listing and tenant requirements, we have been involved in each of these projects since the early stages of the development process. The common thread among these projects is a focus on creating the most dynamic environment possible with a laser focus on securing the most capable and aspirational retail offerings.
Although retail makes up a relatively small portion of the overall project’s net operating income, there is a recognition that the effect on community and ultimately project NOI is directly tied to the ability to create a stimulating ground floor and streetscape experience.
A New Frontier in Suburbia
Heading into the next decade, we see no sign of the mixed- and multi-use development trend slowing down.
Smaller cities along Boston’s suburban ring are beginning to sprout meaningful mixed-use developments (Beverly, Salem, Quincy and Waltham to name a few). We are excited to see how new projects and swelling neighborhoods driven by mixed-use projects like Cambridge Crossing, Washington Village in Dorchester and Boston Landing evolve.
The transformation of suburban malls into high quality mixed-use villages represents a major opportunity as well. The biggest challenge to these adaptive redevelopments will be alignment of stakeholders – anchor tenants, mall owners, and municipalities.
Peter Considine
Additionally, large scale mixed-use projects in New England cities such as Portland, Maine and Burlington, Vermont, farther from Boston’s economic base, have yet to prove themselves. These markets seem primed to welcome amenity-rich multifamily housing and thoughtfully envisioned mixed-use projects.
A governor we see on the continued viability of Boston area mixed-use development is the presence (or, at times, lack thereof) of motivated and capable retail operators. Construction and labor costs, consumer spending habits and a high volume of available spaces have created a dynamic in which quality operators often need to be motivated through attractive rent and massive tenant improvement allowance packages in order to open a location. We are observing TI packages that can exceed four years of base rent. This dynamic is unhealthy and presents a clear risk for owners and prospective developers of mixed-use properties.
Taking a thoughtful, hyperlocal approach to each prospective project from the initial phases allows us to define the viability, targeted uses and community needs of potential retail space within vertical developments.
Peter Considine is a partner at The Dartmouth Co. and Converge Ventures.
